Pound US Dollar Exchange Rate Rangebound on back of Better-Than-Expected UK Consumer Confidence

The Pound US Dollar exchange rate is rangebound heading into the weekend as the UK’s Gfk consumer confidence beat forecasts, boosting Sterling sentiment this morning.

At the time of writing the Pound US Dollar pairing is currently trading at around US$1.3931, US treasury yields remain the main driver of USD today.

Pound (GBP) Steady as Gfk Consumer Confidence Beats Forecasts

The Pound is steady today after the UK’s Gfk consumer confidence index for March came in at -16, beating forecasts of -20 and the highest reading since March 2020.

GfK client strategy director Joe Staton commented on the index saying:

‘Spring is in the air on the back of well-received budget announcements, the successful vaccine roll-out and roadmaps in place for ending lockdown.’

‘The scores looking ahead one year are recovering especially well… If this improved mood translates into spending, it might help reverse some of the economic damage the UK has suffered.’

Furthermore, the UK government’s spending in February was the highest on record at £19.1 billion, though below forecasts of £21 billion, however the size of the government’s spending has limited Sterling gains today.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, noted that although government spending is high, the Office for Budget Responsibility’s (OBR) forecast is too high.

‘The OBR’s full-year borrowing forecast of £354.6bn in the Budget—or £327.4bn excluding write-offs—looks a bit too high.’

‘Borrowing has totalled £285.9bn between April and February and will total £309.6bn in 2020/21 as a whole, if the year-over-year rise in borrowing in March matches the average uplift in the previous three months.’

US Dollar (USD) Muted by Pullback in US Treasury Yields

The US Dollar has had any gains limited against the Pound today as a modest pullback in US Treasury yields (after hitting a one year high yesterday) have caused the US Dollar to be muted in today’s session.

Furthermore, an increase in global risk sentiment has pushed investors to pull away from the safe-haven US Dollar, however the optimistic view of the economic recovery of the US has limited any losses.

It comes as the Federal Reserve retained a dovish stance at their policy decision in the middle of the week, with Fed Chair Jerome Powell saying:

‘While we welcome these positive developments, no one should be complacent. At the Fed, we will continue to provide the economy the support that it needs for as long as it takes.’

Pound US Dollar Exchange Rate Outlook: UK Inflation Data in Focus

Heading into next week, the Pound will see plenty of movement from data releases including employment and inflation rate.

UK inflation released on Wednesday is expected to show a modest growth despite the national lockdown which would prove positive for Sterling.

US Dollar investors on the other hand will be keeping an eye on movement in US Treasury yields and the overall global market mood in the first half of the week.

A further pullback in yields would add further pressure to the US Dollar, and global market mood remains linked to tensions

Georgina Clissold

Contact Georgina Clissold